All constitutions of government are valued only in proportion as
they tend to promote the happiness of those who live under
them. This is their sole use and end.
–
Adam Smith, 1790
Contents
This publication is also available online in a web-accessible version at: https://pub.norden.org/ nord2021-049/
Foreword
4
Summary
5
Introduction: Why wellbeing?
8
Prominent organisations working with the
Wellbeing Economy agenda
12
Chapter 1: In theory and practice
14
Chapter 2: A Nordic Wellbeing Economy
28
Chapter 3: Choices and challenges when developing
a Wellbeing Economy
40
Discussion: Wellbeing Economy at a regional level
45
References
49
Annex 1.1: A world of wellbeing
55
Foreword
Global political agendas are increasingly turning to some of humanity’s most pressing issues, such as climate change, poor mental health, and inequality. It is often done through shared visions, goals and priorities as seen with the Sustainable Development Goals (SDGs) adopted by the United Nations in 2015 and our own Vision 2030, aiming to make the Nordic Region the most sustainable and integrated region in the world by the end of this decade.
While it is crucial to set ambitious visions for our societies, it is equally important to consider whether our current economic models and policy tools advance their fulfillment.
A new model for tackling global challenges is at the core of the Wellbeing Economy concept. Put simply, it is about making an economy ‘fit for the future’ by complementing conventional economic indicators with a broader set of indicators to better capture a range of priorities and guide policymaking.
Several countries in the western hemisphere, including the United Kingdom and New Zealand, have already adopted National Wellbeing Programs and Wellbeing Budgets. At the same time, this concept has also reached Nordic shores with Iceland and Finland qualifying as global frontrunners.
The aim of this report is to contribute to a better understanding of what a Wellbeing Economy is. I also hope that it can contribute to a conversation as to how the Nordic countries can use the Wellbeing Economy model to support the Nordic vision for 2030 and thereby improve the lives of people in the Nordic Region.
I would like to thank Michael Birkjær, Alexander Gamerdinger, and Sarah El-Abd of the Happiness Research Institute, who have written the report on behalf of the Policy and Analysis Unit at the Secretariat to the Nordic Council of Ministers. This report is part of a series of reports produced by the unit which highlight various topics that are important from a Nordic perspective.
Paula Lehtomäki
Summary
To achieve social and environmental – and not just economic – progress, governments and international organisations are today reassessing the fundamentals of our economic systems. This has already resulted in hundreds of ‘beyond GDP’ measures being introduced by a variety of organisations in just the last decade, but more prominently, it has also sparked an official transformation process of the economic systems in New Zealand, Scotland, Wales, Iceland, and Finland towards a so-called Wellbeing Economy.
In theory, a Wellbeing Economy is about actively using wellbeing metrics and tools to inform government priorities and policymaking, but as documented in this report, this concept proves theoretically and practically complex and in practice governments do not seem to apply a designated one-size-fits-all approach.
The ambition of this report is to facilitate more clarity on what a Wellbeing Economy in essence
is, what different forms it can take, how it functions in practice, as well as its benefits and drawbacks. In the bullets below, we summarise the findings and conclusions of this report:
1. A Wellbeing Economy goes beyond GDP
This report finds that a Wellbeing Economy is synonymous with a beyond-GPD-approach. At the core of a Wellbeing Economy, there is not only a desire to move beyond GDP but also an
acknowledgement of the necessity to do so. However, it is crucial to note that going beyond GDP does not imply that GDP is being phased out or replaced. In fact, in many wellbeing economies, GDP continues to play a vital role.
2. A Wellbeing Economy is based on measures of subjective and/or objective wellbeing
This report finds that the contemporary Wellbeing Economy is based on objective and/or subjective wellbeing measures. While objective wellbeing indicators cover the ‘hard facts’ of wellbeing circumstances, such as longevity, education and air pollution, the subjective wellbeing indicators are concerned with the first-person subjective experience, which can be addressed by measures for life satisfaction, mental health or loneliness.
According to our research, the types of indicators used by different Wellbeing Economy initiatives vary significantly. While some initiatives are heavily reliant on objective indicators other subscribe more to a subjective wellbeing approach.
3. A Wellbeing Economy operates on three levels: monitoring, prioritising, and policymaking
The initiatives of states and governments to embark on the pursuit of a Wellbeing Economy typically take shape in three ways: to passively monitor the reality of people’s wellbeing, to actively inform governments’ wellbeing priorities, and to actively guide policymaking towards most wellbeing impact. In this report, a country is considered a Wellbeing Economy only if it actively uses wellbeing measures for the latter two. Countries that adopt passive monitoring frameworks and do not use the respective measures to inform government priorities and/or actively guide policymaking are not considered a Wellbeing Economy.
According to this report, several governments are already using wellbeing measures for both monitoring and prioritising and can thus be categorised as wellbeing economies, but only New Zealand, the UK, Bhutan, and Iceland are engaged in all three levels.
4. A Wellbeing Economy can address looming wellbeing issues in policymaking
Compared to the conventional economic approach (the utility-approach), a Wellbeing Economy has a particular advantage in terms of addressing looming issues such as loneliness, mental health problems, and potentially also environmental challenges. This is because a Wellbeing Economy is capable of addressing these non-market challenges through empirical insights into human experiences, whereas the utility approach is primarily geared to value market goods on market terms.
These advantages of wellbeing metrics over conventional metrics are today utilised by various stakeholders, perhaps most notably the Treasury in the United Kingdom and New Zealand, which have both adopted the measures for their policy appraisals procedures.
5. The Wellbeing Economy still lacks a ‘common language’
Despite the aforementioned opportunities that a Wellbeing Economy presents itself with, it still hasn’t found a ‘common language’. Across the various Wellbeing Economy initiatives we have covered in this report, we identify significant discrepancies in regard to their application in theory and in practice. These discrepancies may inhibit comparisons between performance indicators, the creation of shared standardised frameworks, and general collaboration.
6. The use of wellbeing measures raises ethical concerns and questions
The use of wellbeing metrics raises a lot of ethical questions that the metrics cannot answer on their own: Is the wellbeing of unborn people worth less (or more) than people living today? Is the wellbeing of a child worth more than the wellbeing of an 85-year-old? How do we value the subjective wellbeing of people, relative to personal freedom, planetary boundaries, and migration when we are presented with a trade-off relationship between these issues? And does the use of wellbeing metrics pave the way for so-called paternalistic interventions? As with any other economic approach, there are various political and ethical questions and considerations that wellbeing metrics cannot bring any meaningful answer to without additional perspectives and political guidance.
7. Finland and Iceland are Nordic Wellbeing Economy frontrunners while Denmark is particularly unengaged with the concept
Today, the Wellbeing Economy concept is also being adopted and developed in the Nordic countries. In both Finland and Iceland frameworks for monitorisation and prioritisation are established, and in Iceland the government has already proposed several initiatives aimed at
accommodating the wellbeing priorities.
While Iceland and Finland are fully engaged with developing a Wellbeing Economy, relevant initiatives can also be identified in Sweden, Norway, and Denmark. However, of all the Nordic countries, Denmark seems to be the least engaged with the concept. The Danish initiative only includes a monitorisation exercise dating back to 2015. Since then, Denmark has not engaged in any other wellbeing initiatives of significance aimed at monitoring, prioritising, or including wellbeing metrics in policymaking.
Concluding remark by the authors: It’s important to emphasise that the wellbeing measures used
within a Wellbeing Economy are not, and will perhaps never be, perfect measures for human flourishing. Any measure attempting to capture the essence of human wellbeing through a set of indicators will almost always be a simplification or reduction of reality — a concern that applies to conventional economic indicators as well. Thus, in the years to come, when the concept of the Wellbeing Economy may develop further and emerge in even more countries, a fair evaluation of its performance should not be dependent on its ability to solve societal challenges in a flawless or even ideal manner. Instead, a fair assessment of the Wellbeing Economy‘s effectiveness should be based on how well it can address and cater for human wellbeingin comparisonto traditional economic indicators and methodologies.
Introduction: Why wellbeing?
For nearly a decade, the Nordic countries have been attracting international attention for their high levels of happiness. Nordic countries consistently rank among the very top performers on renowned wellbeing indices such as the United Nations' World Happiness Report,1the Human Development Index2and the OECD's Better Life Index.3But how have the Nordic governments actively promoted societal wellbeing in the past to become ’Happiness Superpowers’? The short answer: they have not. At least not directly.
Research suggests that high levels of income, extensive social benefits, low corruption, well-functioning state institutions, as well as a clear sense of autonomy, freedom, and social trust among citizens, are the most prominent reasons for Nordic happiness.4While behind these remarkable achievements lies – at least in part – some successful policymaking, at the same time the respective decision-makers’ original intention was undoubtedly to promote wellbeing, despite having little to no empirical guidance on what actually drives human wellbeing. Today, such guidance is increasingly available. A global turning point was the 2008 financial crisis, which led prominent institutions such as the OECD and UN, as well as leading economists, to strongly advocate a more pluralistic measurement of social progress.5This gave birth to the ’beyond GDP‘ agenda, which has prompted the growing availability of wellbeing data in the western hemisphere. The active use of this data in agenda-setting and policymaking is what we refer to as ‘the Wellbeing Economy‘. This approach is increasingly being implemented by governments all over the world, with New Zealand’s Wellbeing Budget6perhaps the most prominent example.
The Wellbeing Economy has also reached Nordic shores. In 2017, the Swedish government Photo: Keenan Constance/Unsplash
1. Helliwell, J. et al. (2021). 2. UNDP. (2020).
3. http://www.oecdbetterlifeindex.org/ 4. Helliwell, J. et al. (2020).
5. Stiglitz, J. E. et al. (2009).
introduced its ‘New Measures of Wellbeing’ framework to monitor trends in people’s quality of life and the long-term sustainability of the economy.7In 2019, Kartín Jakobsdóttir, the Prime Minister of Iceland, introduced a similar framework involving 39 proposed national indicators to measure the prosperity and quality of life of the citizens of Iceland.8From 1 July to 31 December 2019, Finland, meanwhile, held the Presidency of the Council of the European Union. Throughout its term, it advocated the adoption of a Wellbeing Economy on a regional, as well as state level.9
But why do the Nordic countries need a Wellbeing Economy when they have done so well without? Why not just stick to business as usual?
Is GDP not enough?
Our current economic system, with its emphasis on economic growth, is, in fact, rooted in the idea of human wellbeing.10The general idea is that economic growth provides people with a greater choice, allowing them to fulfil their desires, thereby improving their wellbeing.
Many will agree that this system has done so admirably. Since the end of the Second World War, which marked the beginning of our collective focus on economic growth, the latter has
progressed in tandem with substantial global improvements in health, literacy, and longevity.11
However, there have been concerns from the outset that GDP growth – i.e. the increase in the amount of goods and services produced within a country in a given time period – is not an adequate indicator of human progress. Even Simon Kuznets, the economist who invented the concept of GDP, emphasised that "the welfare of a nation can scarcely be inferred from a measure of national income. (...) Goals for more growth should specify more growth of what and for what”.12Today, criticism of GDP is being expressed by state officials and international organisations like the UN, the EU, and the OECD, who strongly advocate for a ‘beyond GDP’ agenda. The criticism is often expressed with reference to increasing rates of mental health disorders around the world, but also to climate change and loss of biodiversity, which is jeopardising the wellbeing of future generations.13
Regarding the current state of wellbeing, studies of subjective wellbeing tend to confirm that people’s perceived wellbeing has slowed in terms of progress or even declined despite continued economic growth. One pertinent example is India. From 2006 to 2018, GDP per capita doubled in size, while the average life satisfaction of the population dropped from 5.35 to 3.82 on a 0 to 10-point scale, a staggering 25% decrease. Today, only 3% of the Indian population can be considered ‘thriving’ according to the Gallup World Poll, one of the lowest rates recorded around the world.14
These wellbeing issues and trends can also be identified in the Nordic countries. According to recent estimates by the OECD, more than one in six people across the Nordic countries15have a mental disorder,16equivalent to about 4.5 million people. For young people in particular, problems such as loneliness, stress, and poor mental health seem to be increasing over time.17
7. Ministry of Finance - Sweden. (2017, August 1). 8. Prime Minister's office - Iceland. (2019, September 18). 9. European Council. (2019, October 24).
10. Read, D. (2007).
11. The Global Health Observatory. (2021). 12. Report to the US Congress in 1934. 13. Stiglitz, J. et al. (2018).
14. Lall, J. (2018, July 1), In happiness research, thriving refers to people who rate their current lives between a ‘7’ or higher on the 0-10 life satisfaction scale.
15. Denmark, Finland, Iceland, Norway and Sweden.
16. Anxiety disorders, Depressive disorders, Alcohol and drug disorders, Bipolar disorders and schizophrenia. 17. Relevant literature: Reneflot, A. et al. (2018); Bakken, A (2017); Socialstyrelsen (2017); Gyllenberg, D. et al. (2018);
%
FINLAND
Alcohol and drug use disorders Anxiety disorders Bipolar disorders and schizophrenia Depressive disorders Others Mental disorders (total)
0 5 10 15 20
%
NORWAY
Alcohol and drug use disorders Anxiety disorders Bipolar disorders and schizophrenia Depressive disorders Others Mental disorders (total)
0 5 10 15 20
%
SWEDEN
Alcohol and drug use disorders Anxiety disorders Bipolar disorders and schizophrenia Depressive disorders Others Mental disorders (total)
0 5 10 15 20
%
DENMARK
Alcohol and drug use disorders Anxiety disorders Bipolar disorders and schizophrenia Depressive disorders Others Mental disorders (total)
0 5 10 15 20
%
ICELAND
Alcohol and drug use disorders Anxiety disorders Bipolar disorders and schizophrenia Depressive disorders Others Mental disorders (total)
0 5 10 15 20
Figure 1.1 Share of population experiencing mental disorders in the Nordic countries
Source: OECD/EU (2018) Health at a Glance: Europe 2018: State of Health in the EU Cycle. Paris: OECD Publishing; 2018.
It is, however, very important to state that these parallel trends of economic growth and wellbeing declines do not necessarily indicate causation. Even though loneliness and depression can rise in a period of economic growth, growth itself may not becausingdepression or preventing people from living good lives. Another possible interpretation is that GDP should still be considered a primary driver of human wellbeing, merely falling short of capturingsomeof the vital aspects of wellbeing. In fact, according to the World Happiness Report, GDP per capita is the single best predictor of high average population life satisfaction across countries.18
Towards a Wellbeing Economy
The search for additional ’beyond GDP’ metrics has already resulted in hundreds of measures being introduced by a variety of organisations in just the last decade.19Famous alternatives to
GDP include index measures like theHuman Development Index20or agenda-setting dashboards
such as theSustainable Development Goals.21
More recently, a third approach has gained traction among policymakers and international experts: subjective wellbeing. This approach relies heavily on people’s self-reported answers to questions like ’How satisfied are you with your life nowadays?’ and has proven to be a valid and reliable measure of experience across contexts.22
It is the adoption of these wellbeing measures by states, policymakers, and other members of the international community that are today paving the way towards the concept now known as the Wellbeing Economy.
The Wellbeing Economy is a theoretically and practically complex concept, however, often rooted in diverging theories of wellbeing. In practice, there is no designated one-size-fits-all policy approach that governments can apply. The aim of this report is therefore to provide a framework for understanding and engaging with the concept.
The first section of this report will discuss the theory and practice of a Wellbeing Economy, answering questions such as ’What is a Wellbeing Economy?’ and ’What does it look like?’ The report's second section will focus on the emergence of a Wellbeing Economy in the Nordic region, answering questions such as ’how is the Wellbeing Economy being implemented in the Nordic countries?’ and ’what are some key opportunities and challenges that Nordic agents are facing or might face?’
DISCLAIMER
This report shouldn’t be read as a critique of GDP as a measure of welfare or wellbeing. Nor should the reader be misled to believe that there is a general consensus that GDP should be abolished in order to establish a functioning Wellbeing Economy. Even though many of the Wellbeing Economy initiatives we investigate in this report use a criticism of historical reliance on GDP as their starting point, we find great variation in their view of the continued role of GDP as a measure of progress and wellbeing. While some initiatives seek to replace GDP with new measures of progress, others seek to complement it. It is not our intention in this report to adjudicate these positions.
18. Helliwell, J. et al. (2021). 19. Hoekstra, R. (2020).
20. United Nations Development Programme (n.d.). 21. United Nations. (n.d.).
Prominent organisations working
with the Wellbeing Economy
agenda
Wellbeing Economy Alliance (Global)
The Wellbeing Economy Alliance (WeAll) is a prominent cross-sectoral collaboration hub for academics, businesses, citizens, and networks, with the mission of spreading knowledge and policy tools working towards a Wellbeing Economy. Established in 2018, the WeAll network today comprises more than 200 organisations.23
Wellbeing Economy Governments partnership (Global)
The Wellbeing Economy Governments partnership (WeGo) is an alliance of governments which promotes the sharing of expertise and transferable policy practices in building a Wellbeing Economy. Established in 2018 by founding member Scotland, it today includes the governments of New Zealand, Iceland, Wales, and Finland.24
Photo: Headway/Unsplash
23. https://wellbeingeconomy.org/ 24. https://wellbeingeconomy.org/wego
OECD Centre on Well-being, Inclusion, Sustainability and Equal
Opportunity (WISE) (France)
The aim of the OECD Centre on Well-being, Inclusion, Sustainability and Equal Opportunity (WISE) is to generate new data and solutions that improve people’s wellbeing, reduce
multidimensional inequalities, and better understand the impact of policies and business actions on people’s lives today and in the future.25
What Works Centre for Wellbeing (United Kingdom)
The What Works Centre for Wellbeing is an independent centre of collaboration that develops and shares robust and accessible wellbeing evidence to improve the decision-making of governments, businesses, and civil society. Their aim is to develop and share robust, accessible, and useful evidence on wellbeing.26
The Happiness Research Institute (Denmark)
The Happiness Research Institute is an independent think tank. Its mission is to inform decision-makers of the causes and effects of human happiness and make subjective wellbeing part of the public policy debate. It designs and implements decision-making tools (such as the WALY-model) to set new standards for resource allocation and impact investment.27
Doughnut Economics Action Lab (United Kingdom)
Doughnut Economics Action Lab (DEAL) is a global hub for new economic thinking. Its aim is to help create 21st century economies that are regenerative and distributive by design, so that they can meet the needs of all people within the means of the living planet.28
25. https://www.oecd.org/wise/ 26. https://whatworkswellbeing.org/
27. https://www.happinessresearchinstitute.com/ 28. https://doughnuteconomics.org/
Chapter 1: In theory and practice
In almost all OECD countries nowadays, national statistical
offices have started to include these [wellbeing] measures in
their surveys… [we] need to go beyond measurement.
–
Martine Durand, Chief Statistician and Director of Statistics
Directorate, OECD (2016)
.
29Our definition of a Wellbeing Economy: A Wellbeing Economy means allowing subjective and
objective wellbeing indicators to inform government priorities and/or guide policy decisions. To be considered a ’Wellbeing Economy government’ based on this definition, governments must ‘go beyond measurement’ and give wellbeing metrics an active role in government. Or put differently: Governments that passively monitor societal wellbeing through national wellbeing frameworks or merely commission national statistical offices (or third parties) to collect and
measure wellbeing indicatorscannotbe considered a Wellbeing Economy government under this
definition.
Photo: Clive Tompsett/imagebank.sweden.se
”
The Wellbeing Economy has two main building blocks, which we call ‘theory’ and ‘practice’.
In theory, a Wellbeing Economy is about metrics and tools that are capable of capturing and
assessing human wellbeing. However, as wellbeing has proven to be a rather elastic concept, it is important for decision-makers to be mindful of the various definitions of wellbeing, as well as the implications of choosing one definition over another. Thus, ‘the theory of Wellbeing Economy’ is concerned with defining the type of wellbeing an economy is designed to promote.
In practice, wellbeing metrics can serve three different purposes:
1. Monitoring: Wellbeing metrics are used by governments or statistical offices to monitor the reality of people’s lives and wellbeing.
2. Prioritising: Wellbeing metrics provide information for government priorities, wellbeing budgets, and/or concrete agendas.
3. Policymaking: Wellbeing metrics are used at policy-level to provide a systematic
assessment of the impacts expected and/or achieved by policies. This will often be realised through the adoption of wellbeing measures in cost-benefit analyses for proposed policies (so called ex-ante analysis) or in the evaluation of the outcomes of implemented policies (so-called ex-post analysis).
Figure 1.2 The three purposes of wellbeing metrics in a Wellbeing Economy
It is important to differentiate between these three purposes, as they are brought to bear at different stages of the policymaking process and reflect different commitments. To monitor people’s quality of life, a multitude of indicators are needed to capture various aspects of wellbeing. Most commonly, the initial choice of indicators is an active political exercise. Once a wellbeing framework is agreed on, however, monitoring will be the next step. This suggests a
passive use of wellbeing measures which does not qualify the respective government as a
Evaluating the quality of policies ex-ante or ex-post?
In policymaking processes, policymakers need to assess the quality of given policies. This assessment can be achieved both ex-ante and ex-post. An ex-ante evaluation provides strategic information about policy choices at an early stage, where the possibility to influence the course is greatest. In practice, this approach often attempts to find the best policy solution, i.e. possible alternatives, using cost-benefit or cost-effectiveness analysis. Ex-post evaluation, conversely, is completedwithinthe operating process and can provide useful learning experience for future design and decision-making for similar projects.
Wellbeing Economy government under the definition in question. Conversely, if the wellbeing indicators provide information for actual government priorities and/or guide policymaking at ministries and public authorities, it suggests an active use, and the governmentdoesqualify as a Wellbeing Economy government.
These theoretical and practical debates will be discussed further in the first part of this chapter and visualised in Table 1.1, which summarises and compares three approaches to wellbeing. In the second part of this chapter, we will provide examples of how a Wellbeing Economy is currently being adopted by governments around the world, with New Zealand (and the CBAx model) serving as an in-depth case study on how wellbeing metrics are used in decision-making.
Three approaches to wellbeing
‘Utility’, ‘objective wellbeing’, and ‘subjective wellbeing’ are the terms we use to help navigate through the many seemingly chaotic approaches and definitions of wellbeing. In practice, government Wellbeing Economy strategy might take a hybrid form, drawing from several wellbeing approaches at once. We encourage the reader to be mindful of this throughout the report here. In the subsequent paragraphs, we introduce each of the different wellbeing approaches and clarify how their metrics relate to monitoring, prioritising, and policymaking. Although all of the three approaches share the common assumption that the aim of public decision-making is to optimise societal well-being,30they differ in the ways they define, and measure said wellbeing. These distinctions can have large economic, social, and political consequences. In the words of Nobel laureate Joseph Stiglitz:“What we measure affects what we do."31
30. Read, D. (2007).
Table 1.1 Three theoretical approaches to wellbeing
Current economy Wellbeing economy
HOW IS WELLBEING DEFINED?
Utility Objective wellbeing Subjective wellbeing
HOW IS IT MEASURED?
Revealed preference Stated preference
Physical observations and surveys Surveys
HOW IS IT USED?
WHAT IS MONITORED?
Economic indicators and consumer preferences
Social and environmental indicators (e.g., life expectancy, CO2-emission, gender pay gaps,
etc.)
Subjective wellbeing indicators (e.g., life satisfaction, positive affect, negative affect)
WHAT IS PRIORITISED?
Economic growth Objective goals for humanity (e.g., the Sustainable Development Goals)
Subjective wellbeing burdens (based on measures like Wellbeing Adjusted Life Years or
the subjective wellbeing valuation technique)
WHAT DRIVES POLICYMAKING?
Cost-benefit-analyses using income values Cannot be applied in cost-benefit-analyses (Must elicit values based on utility or
subjective wellbeing approach)
Cost-benefit-analyses using wellbeing values (e.g., CBAx)
Utility: In theory
Since the 1930s, economists have tended to think about wellbeing in terms of utility, which is maximised by the fulfilment of individuals’ preferences and desires. Rooted in the idea that people always make decisions to maximise their own wellbeing, economic theory assumes that their utility levels can be derived from consumption behaviour.32For instance, it is assumed that individuals are able to rank bundles of goods in terms of their desirability and that larger quantities of goods and services are always preferred.33
In practice, as most goods and services can be purchased, the utility of a person is measured by
revealed preferencemethods involving some sort of detective work, whereby clues about the preferences of individuals are pieced together based on their economic behaviour.34However, there are several societal goods that cannot be or are not traded on a market, such as clean air or parenting. These non-market goods are instead elicited/measured bystated preference
methods which measure utility through carefully worded survey questions. The intention here is to assess an individual's willingness-to-pay-for or willingness-to-accept a good or an experience. Money plays an important role in both the revealed and stated preference methods. As money is scarce, it is assumed rational individuals will spend it only on the things they truly desire. As a result, income becomes a proxy for utility (or wellbeing) on an individual and population level:
32. Read, D. (2007). 33. Peterson, L. G. (2003). 34. Peterson, L. G. (2003).
high income is equated with higher wellbeing on an individual level and economic growth is equated with the success of a society.
However, while utility has often been considered a measure of wellbeing in the past, throughout this report we consider it to bedistinctfrom the Wellbeing Economy approach. As we will discuss, the inability of utility to reflect that which matters in life has inspired the search for new and better definitions of wellbeing.
Utility: In practice
• Monitoring people’s reality using utility: Based on this approach, societal progress is equated with economic health. In orthodox economics, many macroeconomic metrics for a stable economy are tracked on a national level, such as economic transactions, trade, unemployment rates, inflation, or GDP per capita. In addition, non-market goods will often be monitored and valued using consumer preferences.
• Wellbeing priorities using utility: The utility approach prioritises economic growth, as this is equated with higher income for individuals and, thus, higher wellbeing. This, however, does not always correspond with subjective wellbeing levels. Figure 1.3 contrasts the evolution of GDP with life satisfaction in Denmark from 2005 to 2020. Despite economic downturns during the financial crisis in 2008 and the COVID-19 crisis in 2020, the Danish economy has grown by as much as ten percent from the base year of 2005. According to the utility approach, this increase in wealth has meant an increase in wellbeing among the Danish population. When asking the Danish population directly, however, the picture looks much different. We clearly see a relative ‘decoupling’ between wealth and subjective wellbeing.
GDP per capita Life ladder
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 90 95 100 105 110 115
Figure 1.3 GDP per capita vs. life satisfaction in Denmark from 2005–2020 (Year 2005 = Index 100)
Subjective Wellbeing: In theory
Subjective wellbeing is based on the belief that wellbeing is a ’measurable’ good that is separable from the choices individuals make.36Instead of measuring purchasing choices, subjective
wellbeing researchers are concerned with measuring first-person subjective experience by asking people directly to assess the quality of their lives.37
Methods of measuring subjective wellbeing generally fall into two distinct categories: ‘affect’ and ‘evaluation’. ‘Affect’ refers to the day-to-day experience of positive or negative emotions. These may include joy, anxiety, interest, boredom, pain, pleasure, and so on. Evaluation refers to a general assessment of certain aspects of life. The most widely used life evaluation measure, life satisfaction, asks respondents to answer the following question: ‘All things considered, how satisfied are you with your life as a whole these days?’.38Responses are typically recorded on a scale of 0 to 10, with 0 being completely dissatisfied and 10 being completely satisfied. Over the last three decades, subjective wellbeing data has been routinely collected, analysed, and published by a variety of public and private stakeholders internationally.
• Policymaking using utility: Cost-benefit analyses (CBA) and cost-effectiveness analyses (CEA) are used by decision-makers of all kinds to select between various policy choices. Using money as a metric, a traditional CBA compares the monetary costs of a policy with its benefits and prioritises the one which produces the most wealth.
Based on the utility approach’s assumption of rationality, choosing policies according to income seems perfectly reasonable. However, Nobel prize-winning contributions from psychologists and economists including Daniel Kahneman and Richard Thaler have revealed an impressive array of cognitive biases that lead people to persistently irrational decision-making.35In reality, human beings often do not behave as rational wellbeing maximisers in the way conventional economic models have tended to assume. The effect of much of this work has been to relegate choice behaviour as an insufficient indicator of human wellbeing. This in turn raises the question of the usefulness of utility-based CBAs.
35. Happiness Research Institute & Leaps by Bayer. (2020). 36. Read, D. (2007).
37. The idea of measuring happiness directly is not new but recently experienced somewhat of a renaissance. In the 18th century, English philosopher Jeremy Bentham embraced that human beings are governed by pleasure and pain and that public policy should provide “the greatest happiness of the greatest number”. (Source: Bentham, J. (1789)). However, at that time, large scale measurements of happiness were deemed impossible, which led the approach to lose its prominence. In the 20th century, triggered by technological advancements and dissatisfaction with the utility approach, the revival of the approach was born. Famously, the economist Richard Easterlin claimed that, despite the dramatic rise in real incomes prior to the 1970s, countries' happiness has increased little, if at all. (Source: Gleisner, B. et al. (2011)). In the following years, additional research has begun to reveal robust and reliable insights into the nature and causes of human happiness. As a result of these efforts, an economic psychology founded on validated measurements of self-reported wellbeing has emerged. (Source: Happiness Research Institute & Leaps by Bayer (2020)).
Subjective Wellbeing: In practice
• Monitoring people’s reality using subjective wellbeing: As an integral part of the ‘beyond GDP’ agenda, economists and psychologists recommend that governments monitor the subjective wellbeing of citizens. We differentiate between two ways this is done in practice. The first group of countries integrate subjective wellbeing metrics such as life satisfaction, affect and domain measures like perceived health status, education, personal security, or housing quality into their national monitoring frameworks alongside a variety of objective indicators.39This is the case for both New Zealand’s Living Standards Framework,40and the OECD’s Framework for Measuring Wellbeing and Progress,41which count life satisfaction among their indicators. While there are also monitoring frameworks like the New Economics Foundation’s National Accounts of Wellbeing, which consist exclusively of subjective wellbeing indicators,42this is not the global norm. The second group of countries places the responsibility to measure and monitor subjective wellbeing on third-party organisations or statistical offices. This is the case in the Netherlands, United Kingdom, Israel, Belgium, Denmark, Italy, and many others.43There are also non-governmental organisations which use subjective wellbeing to monitor progress around the world. Most noteworthy is the annual World Happiness Report, which ranks countries according to the life satisfaction of the average population.44
• Wellbeing priorities using subjective wellbeing: To identify wellbeing priorities out of a wide range of indicators from a monitoring framework, subjective wellbeing can be used as a selection tool. One way to operationalise this is to use life satisfaction to assess the relative importance of each indicator in driving human wellbeing. As policymakers face budget constraints, this method can inform decision-makers on the circumstances that constitute the greatest immediate threat to human wellbeing. This is what we define as ‘wellbeing burdens’. This has already been applied to the Sustainable Development Goals (SDGs), which saw well-known wellbeing economists Jan-Emmanuel De Neve and Jeffrey Sachs unpacking the relative importance of each SDG in terms of life satisfaction. Another example of this is the WALY-analyses conducted by The Happiness Research Institute for Danish organisation ‘Ældre sagen’, which document how loneliness constitutes the greatest wellbeing burden among those aged 50+ in Denmark.45
• Policymaking using subjective wellbeing: Life satisfaction has a proven track record as a tool for guiding policymaking for public authorities at national and community
level.46Today, wellbeing evaluation techniques are a popular alternative to ‘stated’ and ‘revealed’ preference methods for valuing non-market goods in CBAs.47In many countries, including New Zealand and the UK, wellbeing evaluation techniques have become the standard procedure for valuing non-market goods in policymaking. Happiness researchers have used these to value air pollution, flood hazards, terrorism, and wind turbines.48In New Zealand, social impact is valued using life satisfaction and included in the CBAx tool,
39. Durand, M. (2018).
40. The Treasury – New Zealand. (2019, December 12). 41. OECD. (2020).
42. Michaelson, J. et al. (2009).
43. For European Union Member States, Eurostat publishes a Quality of Life Dashboard, allowing policymakers to benchmark countries on several subjective indicators that cover important aspects of life (https://ec.europa.eu/ eurostat/cache/infographs/qol/index_en.html).
44. https://worldhappiness.report/ 45. Birkjær, M. & Kaats, M. (2021).
46. Life satisfaction is the preferred metric as it is a reliable measure of wellbeing across domains in a wide variety of contexts. It tends to remain stable over time across individuals, is associated with genetic and physiological markers, responds to changes in life circumstances, and can predict future behaviours including suicide. (source: Diener, E. et al (2012)).
47. One remarkable benefit is that individuals are not asked to value the issue at hand directly, but instead to evaluate their general life satisfaction. This presumably less cognitively demanding task does not seem to evoke answers considered desirable and therefore reduces the possibility of strategic behaviour. (Source: Frey, B. S. et al. (2009)).
Objective wellbeing: In theory
The objective wellbeing approach postulates that wellbeing is achieved through the provision of objective goods including relationships, meaningful knowledge, autonomy, achievement, and pleasure.51In economics, objective wellbeing is most tangibly associated with the ‘capability
approach’ pioneered by economist Amartya Sen and philosopher Martha Nussbaum.52By this
account, wellbeing is best understood in terms of ‘capabilities’, which are defined as people’s real opportunities to participate in society and live a fulfilling life. The capability approach has influenced development policy and the creation and measurement of monitoring frameworks in particular, because it identifies a rather crucial role for government.53Explicitly, this approach calls for the expansion and provision of human capabilities such as health and education for everyone, rather than increasing economic growth for its own sake. Capabilities can be expanded by investing in different kinds of ’capitals‘ such as social, natural and human capital.54
The capability approach differs from subjective wellbeing in that it is more expansive and informationally demanding.55Contrary to the subjective wellbeing approach, it recognises more explicitly that the wellbeing of individuals is affected by the circumstances surrounding
them.56There is a larger focus on ensuring sustainable living practices and respecting the earth’s biophysical boundaries, as this by extension ensures the wellbeing of future generations.57In that way, the capability approach complements the subjective and person-centric measurement of mental states with broader objective measurements of resource-use and inequalities within a society.
providing an alternative to conventional cost-benefit analysis.49Wellbeing valuations have also been applied to value investment decisions in the private sector. The Happiness Research Institute, in collaboration with the impact investor Leaps by Bayer, has also developed a metric called ‘Wellbeing Adjusted Life Years’, which is able to steer decisions towards the greatest happiness return on investment.50
Objective wellbeing: In practice
• Monitoring people’s reality using objective wellbeing: The objective wellbeing approach has inspired several countries and statistical offices to monitor a politically agreed-upon set of social and environmental indicators that measure a country’s progress. Driven by the ‘beyond GDP’ agenda, countries and organisations have created indexes and dashboards that include either purely objective or a mix of objective and subjective measures of
49. Jensen, K., & Thompson, C. (2020).
50. Happiness Research Institute & Leaps by Bayer. (2020). 51. Rice, C. M. (2013).
52. Gleisner, B. et al. (2011). 53. Bache, I. & Reardon, L. (2016). 54. Dalziel, P. et al. (2018). 55. Bache, I., & Reardon, L. (2016). 56. Dalziel, P. & Saunders, C. (2015).
57. In Sen’s view, an exclusive focus on happiness is problematic, as people have ‘adaptive preferences’, which means that expectations of life are linked with their experience of life. Rephrasing this slightly, a poor person may be satisfied with less. Therefore, instead of only measuring subjective wellbeing by asking the person directly, he proposes an alternative way, by paying more attention to “objective circumstances”. (Source: Burns, T. (2016)).
Cases: How wellbeing is adopted by governments
In review, state and government initiatives working towards a Wellbeing Economy typically take shape in one of three ways: passively monitoring the reality of people’s wellbeing, actively informing government’s wellbeing priorities and actively steering policymaking towards most impact on wellbeing. A country is considered a Wellbeing Economy only if itactivelyuses wellbeing for the latter two, either by providing information for its wellbeing priorities or guiding policymaking.
Armed with this terminology, we have created Table 1.2 to present information about various governments and their wellbeing initiatives. Aiming to consolidate our theoretical understanding of what constitutes a Wellbeing Economy, we highlight and classify certain countries’ wellbeing initiatives according to Figure 1.2.
wellbeing. Examples of this include the Social Progress Index or the Human Development Index, which contain exclusively objective wellbeing measures.58Countries like
Wales,59Scotland,60and New Zealand61have also developed dashboards that monitor societal wellbeing through a diverse set of indicators.
• Wellbeing priorities using objective wellbeing: To prioritise some objective indicators over others, a selection tool must be applied. As different indicators are measured in different units, either an empirical or a political approach is required to be able to select such priorities. If the empirical approach is chosen, objective wellbeing must lend from subjective wellbeing or utility; it requires the use of either life satisfaction or stated-preference methods to inform policymakers on which indicators should be prioritised over others in the face of a limited budget. Taking the political approach, the priorities are simply chosen either by politicians, or experts, using a wide array of background research that informs their decisions. Arguably the most well-known example is the Sustainable Development Goals (SDGs), which measure different aspects of economic, social, and environmental development within countries.62
• Policymaking using objective wellbeing: The objective wellbeing approach, being composed of several non-comparable indicators, cannot be used in impact assessment and policy evaluation. Instead, policymakers are forced to lend either from the utility approach or the subjective wellbeing approach. In its purest form, CBA converts impacts of a policy or investment decision into a single common currency. Conventionally, economic costs and benefits are valued in monetary units. The utility approach struggles to value non-market goods, however. More recently, wellbeing valuation techniques have gained traction in the valuation of these.63
58. Elliott, S. J. et al. (2017).
59. Welsh Government. (2019, September 26). 60. Scottish Government. (2021, April 26).
61. The Treasury – New Zealand. (2019, December 12). 62. United Nations. (n.d.).
Figure 1.4 Classification of wellbeing initiatives
In this way, countries are classified as passively monitoring wellbeing either if they measure wellbeing indicators in their statistical offices or possess a monitoring framework. They are classified as actively providing information for wellbeing priorities if they have a wellbeing budget or set national wellbeing priorities etc.
We are aware there are many hybrid forms, making it difficult to put countries in neat
categories. The intention of this exercise, however, is not to grade a country, but to bring clarity and structure to the theoretical and practical questions regarding the Wellbeing Economy. The overview of country classifications can be found in Table 1.2. A more detailed description of each country case-by-case can be found in Annex 1.1.
Table 1.2 Country classification
Country Initiative(s) Monitoring Prioritising Policymaking
Bhutan Gross National Happiness Index x x x
Scotland National Performance Framework (NPF) x x
The Netherlands The Monitor of Well-being & SDGS 2020 x
France Law 411 - the Sas Act x x
Canada Canadian Index of Wellbeing x
Wales The Wellbeing of Future Generations Act (2015) x x
United Kingdom Measures of National Wellbeing, The Green
Book, and the What Works Wellbeing Centre x x x
Italy Equitable and Sustainable Wellbeing x x
Australia Measure of Australia’s Progress (MAP)
Treasury Wellbeing Framework x x
Ecuador Secretariat of Buen Vivir x x
New Zealand The Living Standards Framework (LSF), The
Wellbeing Budget, and the CBAx tool x x x
Case study: New Zealand and the CBAx model
This section draws on expert insights and knowledge from:
Kirsten Jensen, Principal Advisor, the Treasury of New Zealand (Te Tai Ōhanga)
Despite the fact that the New Zealand economy is relatively sound, experiencing robust growth, and maintaining low rates of unemployment, in May 2019 the Minister of Finance of New Zealand, Grant Robertson, and the Prime Minister of New Zealand, Jacinda Arden, introduced a new approach to the annual budget: The Wellbeing Budget.64
The 2019 budget illustrated five priorities: aiding and investing in the transition to a sustainable and low emissions economy; supporting a productive nation in the digital age; improving Māori and Pacific incomes, skills, and opportunities; reducing child poverty; and supporting good mental health for all New Zealanders.65These five priorities were established as the five key areas that, with development and investment, would allow for increased wellbeing among New Zealanders. Although the 2019 Wellbeing Budget did not take a strictly environment-centred approach, there is a clear understanding, as stated in the budget, that New Zealand’s natural resource base is the foundation for its long-term wellbeing.66
But how can it be determined whether the budget will have an effective impact on the population’s wellbeing?
The challenge of comparing the impact of budget proposals:
To provide information for budgetary decisions, ministries and public bodies conduct cost-benefit and cost-effectiveness analyses to evaluate the expected impact of different budgetary
proposals. This exercise requires the use of a single unit or a ‘common currency’ of impact across all proposals, otherwise comparison between proposals would be impossible. For instance, if the effect of one proposal was valued in terms of its impact on people’s health (e.g. expected effect on life expectancy) and another proposal was valued in terms of its impact on fiscal savings (e.g. cost saving from reduced hospitalisations), the impact of the two proposals would, by design, be more difficult to compare.
The common way to deal with this in economic appraisals is to use monetary market values (e.g. ‘NZD$’) as the common currency. Based on the theoretical utility approach, it is generally assumed that the prices that people are willing to pay for goods or a service reflect the value of the benefits that they obtain from them. Thus, the monetary value of goods or a service can be estimated from information about whether people purchase these at particular prices and in what quantity, thus giving decision-makers the option of information about effect measures expected for their budget proposals.
However, for several impacts that are integral to wellbeing and public policy – such as air quality, quality of neighbourhood, a good social life – there is no observable market value. So how can wellbeing be considered in economic appraisals? To answer this question, the Treasury in New
Zealand introduced new non-market valuations intoCBAxto evaluate budget proposals. CBAx
takes a wellbeing-based approach to cost-benefit analysis that encourages agencies to develop clearer information on the expected wellbeing impacts of budget initiatives.67
64. The Living Standards Framework provides the basis for the wellbeing approach in the budget - informing budget priorities and the assessment of budget proposals. This includes multi-dimensional wellbeing domains (akin to the domains of the OECD Better Life Index). It is supplemented by He Ara Waiora, which brings a Māori perspective on wellbeing.
65. Ibid. 66. Ibid.
What is CBAx?
In practice, CBAx is a spreadsheet model containing values for various outcomes, ranging from the cost of improved contact with neighbours to the fiscal savings from avoiding diabetes. These outcomes can then be used by different ministries to run a cost-benefit assessment as part of their background analysis for their annual budget proposals.
As with conventional economic appraisal methods, CBAx values are always measured in monetary terms (NZD$) so that all impacts are comparable. However, different CBAx values monetise different types of impact and are derived from different methodologies. For instance, the actual fiscal savings for the government from ‘avoided costs’ of diabetes amount to $4,075 per year, while the value lost for an individual living in a cold house is $6,991 per year.68The former value can easily be elicited from actual fiscal costs savings, while the latter value is derived from a so-called subjective wellbeing valuation technique.
The subjective wellbeing valuation technique
As explained, for many government interventions, no market value is available for the relevant impacts, for which reason non-market valuation methodologies are needed to derive a value. In the CBAx model, these valuations include values based on self-reported life satisfaction values from the population converted into a monetary value.
To provide an example of how this method works: in the case of the value of living in a cold house, it is possible, using regression analysis, to infer how much life satisfaction individuals living in cold houses lose on average compared to people who do not live in cold houses. The inferred value on lost wellbeing can then be converted into a monetary value using a ‘wellbeing-to-New-Zealand-dollars-exchange-rate’ that is based on the correlation between life satisfaction and income within the population. For example, if a 10% decrease in income leads to a 5% decline in life satisfaction and living in a cold house also leads to a 5% decline in life satisfaction, the ‘cost’ of living in a cold house is roughly the equivalent of a 10% loss of income. In this specific case, the cost of ‘living in a cold house’ is valued at -$6,681 per person per year.
In addition to the subjective wellbeing valuation technique, CBAx also makes use of other valuation methods – such as willingness-to-pay analysis – to elicit values for non-market impacts.
Armed with CBAx and the non-market valuation techniques – such as the subjective wellbeing valuation technique – policymakers now have the opportunity to value wellbeing in their economic appraisals.
Examples of 2021 values from CBAx:69
Monetary value Unit Methodology Living in a colder house -$6,681 Per person
Subjective wellbeing valuation technique
(for every one point change on a
0–3 point scale) (NZD) per year
Feeling lonelier -$17,543 Per person
Subjective wellbeing valuation technique
(for every one point change on a
0–4 point scale) (NZD) per year
Having money shortage -$19,274 Per person
Subjective wellbeing valuation technique
(for every one point change on a
0–2 point scale) (NZD) per year
Having diabetes
-$4,968 Per patient Total healthcare costs for people with diabetes compared to healthy counterparts
(NZD) per year
Losing access to open space
-$1,000 Per dwelling Willingness to pay for open space worth $2,000 to $15,000 per hectare, with approx. 13 dwellings per hectare assumed
(NZD) per year
Risk and opportunities of CBAx over conventional CBA
Improved comparability and coverage
The overall benefit of CBAx compared with conventional economic CBA analysis is that CBAx standardises values across proposals, increasing comparability. Furthermore, CBAx includes values based on subjective wellbeing methodologies, e.g. social connections and mental health, which essentially makes it possible to consider and compare vital components of welfare that are otherwise not valued. This argument is also echoed in an external assessment conducted in 2018, which states that the wellbeing valuations of CBAx have greatly improved the consistency of the cost-benefit assessments that the different ministries send each year as a background analysis for their budget proposals.70
Easier and cheaper
Considering a non-market impact in a cost-benefit analysis is often a difficult and potentially time-consuming and expensive exercise for decision-makers if using conventional methodologies (such as willingness-to-pay analysis). It is often cheaper and quicker to develop the subjective wellbeing valuation technique using large datasets first, and then bring it into practice.
Monetisation or not?
Monetising values is a process that seems to cause a bit of division. While some are pro-monetisation, others argue it would be better to express outcomes in wellbeing terms – such as Wellbeing Adjusted Life Years (WALYs).71In Kirsten’s opinion, people are more familiar with monetary values, which makes these kinds of impact values more understandable than wellbeing values. Or put differently: it’s easier to communicate and engage with an impact value of $6,681 than 0.14 WALYs.
69. These values can be found in the online spreadsheet model: Treasury of New Zealand (2020, December 11). 70. Hogan, A. et al. (2018).
However, one could argue that monetised wellbeing values are more susceptible to
misunderstanding, as people could read the values as a reference to actual fiscal costs, rather than as one theoretical monetary value. Furthermore, the wellbeing-to-income exchange rate used for monetisation is subject to debate.72
It is, however, important that this discussion does not get in the way of what truly matters: open engagement and a nuanced approach that enables analysis across multi-dimensional wellbeing domains. As she states: “There are opportunities to have both WALY measure and
monetisation. These can work together”.
A need for more distributional analysis
A major concern with CBAx, but also cost-benefit analysis in general, is the current lack of distributional analysis. As governments begin to adopt wellbeing measures in their policy-making tools, it is becoming increasingly important that these tools not only look at average effects but also find ways to cover distributional impacts. Or as Kirsten Jensen puts it: “it is not just about what the impactsare, but also – forwhom”.
Three recommendations for Nordic governments and organisations considering
wellbeing impact tools - by Kirsten Jensen
Be clear about use in decision-making
It is vital to consider how wellbeing metrics will be used in decision-making and for what purpose, including the interface with other analysis and consideration of all impacts, whether these are monetised or not. To incentivise the use of such tools, a clear demonstration of the tool's benefits and limitations in comparison to, for example, traditional cost-benefit analysis, may be needed.
Be open and transparent
Openness and transparency are key principles. Some impact tools are ’black boxes’, with no way of knowing what assumptions are being made or how the models operate.
Be cautious but experimental
Compared to other non-market valuation methodologies, the use of subjective wellbeing metrics is relatively recent. As there is room for improvement, people should proceed with caution until the practice is further developed and established. At the same time, it's critical to leave space for experimenting with new measures and comparing findings and interpretations with other methods.
Chapter 2: A Nordic Wellbeing
Economy
This chapter draws on expert insights from interviews conducted during the research phase for this report. The country case studies are informed by the following sources for this chapter:
• Jussi Ahokas, Chief Economist at the Finnish Federation for Social Affairs and Health
• Päivi Mattila-Wiro, Ministerial Adviser at the Finnish Ministry of Social Affairs and Health
• Benedikt Arnason, Director General of Department of Policy Coordination, Prime Minister´s Office
• Andreas Vilhelmsson, Public Health Researcher at Lund University and the University of Gothenburg
• Paul Fuehrer, Deputy Head of Department of the School of Social Sciences, Södertörn University
In this chapter, we delve deep into each of the Nordic countries and place these on the Wellbeing Economy continuum, both theoretically and practically.
The Nordic countries have a considerable head-start in terms of wellbeing compared to the rest of the world. Since 2012, the Nordic countries have consistently ranked in the top ten of the world’s happiest countries. Historically, they have had a strong emphasis on equality and a well-established welfare state model. A publication from the Sustainable Development Solutions Network in 2015 shows that the Nordic countries, alongside Switzerland, were the only countries prepared to meet the Sustainable Development Goals in 2030.73
Despite these structural advantages, the Nordic countries are not utopias. 12.3 percent of the total population of the Nordic Region are struggling or suffering, with one in six suffering from a mental health disorder.74In Denmark, 75,000 good years of life are lost to loneliness annually in the adult population.75In Sweden, the cognitive skills of young adults under the age of 15 are below the OECD average.76In Norway, one in four have reported living with discrimination, while 38% live with low life satisfaction.77In Finland, suicide rates are way above the OECD
average.78In Iceland, only 74% of the youth population perceive their mental health to be good.79
In sum, a Wellbeing Economy approach might appeal to the Nordic countries if they are to leverage their head-start while addressing structural challenges in mental health and societal wellbeing. After a series of interviews and research, we can now outline how Iceland, Finland, and Sweden have worked towards implementing a Wellbeing Economy. Denmark on the other hand is not yet classified as working actively with the Wellbeing Economy, while a wellbeing strategy seems to be underway in Norway. Table 2.1 summarises the status of wellbeing economy initiatives in the Nordic countries.
Table 2.1 Country classification
Country Initiative(s) Monitoring Prioritising Policymaking
Denmark - Quality of Life Survey of 2015 –
Statistics Denmark X°
Finland
- Economy of Wellbeing Steering Group and Wellbeing Committee - 2023 National Action Plan - Member of Wellbeing Economy Government’s Alliance
X* X*
Iceland
- Quality of Life Survey 2018 - 39 Wellbeing Indicators framework
- 2021–2025 Fiscal Strategy Wellbeing Priorities
- Member of Wellbeing Economy Government’s Alliance
X X (X)
Norway - Quality of Life in Norway Report
of 2020 – Statistics Norway X (X)
Sweden
- New Measures of Wellbeing introduced in 2017 – Ministry of Finance and Statistics Sweden
X X
*Inactive – Marking an inactive phase of the respective initiative(s) for monitoring, prioritising, and/or policymaking – the initiative has not been formally applied.
°Terminated – Marking the official termination of the initiative(s).
73. Kroll, C. (2015).
74. Birkjær, M. (2018). In happiness research, ‘struggling’ refers to people who rate their current lives between a ‘6’ and ‘5’ on the 0–10 life satisfaction scale. ‘Suffering’ refers to people who rate their current lives a ‘4’ or lower on the same scale. 75. Birkjær, M & Kaats, M. (2021).
76. OECD. (2016).
77. Støren, K. et al. (2020, October). 78. OECD. (n.d.).
Norway
In a first bid to gain knowledge of quality of life in Norway and explore potential differences and discrepancies in quality of life across different groups of the population, Statistics Norway conducted its first quality of life survey in March 2020.80To explore Norwegian quality of life, Statistics Norway focused on questions like ’How satisfied are you with life?’, and other subjective questions on optimism about the future, commitment, coping, as well as positive and negative emotions. The survey from March 2020 also explored discrepancies with regard to how living conditions such as health, social relations, the school environment, democratic rights, leisure etc. could affect Norwegians’ life satisfaction.
The 2020 report shows that Norway has initiated an extensive process of measuring wellbeing, but the government also declared in July 2021 that it will build a national wellbeing strategy in the near future.81
Denmark
Though Denmark for consecutive years held the title as the happiest country in the world,82it is not known for employing and using wellbeing measures in policymaking. According to the OECD, 28 out of 37 member countries are today operating with some sort of wellbeing framework, but Denmark is not one of them.83
In 2015 the Danish Statistical Office did, however, start to measure the quality of life of Danes in a nationwide project using subjective and objective wellbeing indicators, but this project wasn’t continued.84Since then, Denmark has not engaged in any other wellbeing initiatives of
significance aimed at monitoring, prioritising, or including wellbeing metrics in policymaking. Denmark, as the only Nordic country, cannot be considered a Wellbeing Economy, according to our criteria in Chapter 1. Norway, on the other hand, has begun to track well-being on a national basis, and a wellbeing strategy appears to be in the works. Meanwhile, the other Nordic countries (Finland, Iceland, and Sweden) are very different cases in this respect.
80. Søren, K. et al. (2020, October). 81. Regjeringen (2021)
82. Helliwell, J. et al. (2021). 83. OECD. (2019a). 84. Danmarks Statistik. (n.d.).
Finland
This section draws on expert insight and knowledge from:
Jussi Ahokas, Chief Economist at the Finnish Federation for Social Affairs and Health, and Päivi Mattila-Wiro, Ministerial Adviser at the Finnish Ministry of Social Affairs and Health.
According to research, the Finnish welfare system is critical to the population’s wellbeing,85which helps us to understand why Finland ranks top in the world on life satisfaction.86In the early 2010s, the Finnish Federation for Social Affairs and Health (SOSTE) was one of the first organisations to restart public debate on welfare and wellbeing in Finland. According to Jussi Ahokas, the Chief Economist of SOSTE, the political environment after the 2008 financial crisis and the austerity policies in Europe demanded a return to a more comprehensive social and health policy. SOSTE wanted to reframe political debate so that welfare would be seen as an investment opportunity for wellbeing in Finland. This was the starting point of the Wellbeing Economy narrative in Finland.
The Finnish government first started active efforts to work with the Wellbeing Economy concept during the Finnish Presidency of the European Council in 2019. At the end of its term, its policy conclusions advocated the use of wellbeing metrics in EU policymaking.87In the meantime, the Finnish government has been working on reforming the social welfare and healthcare system to ensure more equal and adequate welfare and healthcare services for the population. The intention is that Wellbeing Economy thinking will nourish this.88
The Finnish concept ofEconomy of Wellbeing89still ascribes a large role to conventional economic growth. Building on the historical idea of Nordic welfare, it more closely resembles the thinking of the OECD and the European Union in calling for inclusive or sustainable growth. This approach differs from the view of SOSTE and Finnish civil society, which advocate an increased focus on wellbeing and sustainability of the planet, regardless of how it affects GDP.
The Finnish approach to the Wellbeing Economy
Although the Finnish Wellbeing Economy aims to promote wellbeing and sustainable economic growth simultaneously, economic growth must be economically, ecologically, and socially sustainable, and it must reduce inequalities. While acknowledging the importance of
sustainability, the Finnish approach does not place ecological health and biophysical boundaries at the core of its thinking.90The Finnish government acknowledges that something needs to change, however, and that GDP alone is not an adequate measure of progress and wellbeing.91
The theoretical approaches of wellbeing as elaborated in Chapter 1 would, in many ways, categorise the Finnish Wellbeing Economy as a hybrid form. On the one hand, it seems to draw from the objective wellbeing approach in that it recognises the importance of monitoring and making decisions based on other indicators besides GDP, even though GDP is still recognised as a very important indicator. On the other hand, the Finnish Wellbeing Economy also draws on the subjective wellbeing approach, as subjective indicators are deemed important, with the Ministry of Social Affairs and Health set to review and possibly add new subjective wellbeing indicators in the coming years.92
85. Pacek, A. et al. (2008). 86. Martela, F. et al. (2020).
87. Council of the European Union (2019, October 17); Demos Helsinki. (2021, February 9). 88. According to Päivi Mattila-Wiro (interview).
89. The wellbeing initiatives of the Finnish government are referred to as ‘Economy of Wellbeing’ instead of ‘Wellbeing Economy'. To avoid confusion, we will refer to both as ‘Wellbeing Economy’. However, one should keep in mind that the two concepts are different in certain respects, such as how they regard the role of economic growth. In the Economy of Wellbeing, economic growth plays a more important role than in the Wellbeing Economy.
90. According to Jussi Ahokas (interview).
91. Ministry of Social Affairs and Health. (2021, March 9). 92. According to Päivi Mattila-Wiro (interview).
